The economics team at Goldman Sachs has lowered its tracking estimate on Q1 US GDP growth to 2.3% from 2.5% today following housings starts and PPI data. They've also boosted their estimate for the February 29 release of PCE inflation to +0.43% from +0.35%.
Goldman is getting a bit of extra attention right now because they accurately forecast the upside surprise in CPI.
BOTTOM LINE: The producer price index (PPI) increased above expectations in January. Core producer prices increased well above consensus expectations, as the PPI excluding food and energy rose 0.5%, and the PPI excluding food, energy, and trade services increased 0.6%. Start-of-year price increases likely drove the strength in medical categories, and we also assume a return to more normal sequential readings for the financial services components in the spring. Based on details in the PPI, CPI, and import price reports, we estimate that the core PCE price index rose 0.43% in January (vs. 0.35% previously), corresponding to a year-over-year rate of +2.85%. Additionally, we expect that the headline PCE price index increased 0.36% in January, or +2.39% from a year earlier. Housing starts declined 14.8% in January, well below consensus expectations for a flat reading, and declined from an upwardly revised December level. Building permits decreased 1.5% in January, against consensus expectations for an increase. We lowered our Q1 GDP tracking estimate by 0.2pp to +2.3% (qoq ar) and our domestic final sales forecast by the same amount to +2.6%. We left out our past-quarter GDP tracking for Q4 unchanged at +3.2%, compared to +3.3% as previously reported.
